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SnapNames EMail: Company Admits That Employee Bid at SnapNames Domain Auctions for Years

Snapnames Proposes to Make Cash Plus Interest Payments

     
6:43 pm on Nov 4, 2009 (gmt 0)

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I just received an email from Snapnames confirming that an employee has been bidding "secretly", i.e, without corporate knowledge/approval, for years, apparently from 2005 onwards. The employee has been fired.

According to Snapnames the employee participated in 5% of auctions since 2005/6.

The email's content hasn't been posted at the Snapnames "news" page, however SnapNames has posted a related FAQ here: [snapnames.com...]

Snapnames proposes to make payments, plus interest, in auctions in which the "secret employee bidder" participated. It will be interesting to see exactly how this is worked out as the participation of any one person, at auction, can have a variety of effects. Outcomes are not always a matter of "the last 2 people bidding". For example, some folks may withdraw from an auction simply based upon the number of people bidding at the outset, i.e., thinking there's just too much interest. Others may have withdraw based upon seeing a certain nickname in the auction, under the "Oh no! Not him again! He always bids things up!"

So, is the "solution" simply to refund the winning bidder the amount he/she last bid before the insider-bidder jumped in?

The "settlement" will include 5.22% interest. Better than bank rates, but what if the winner carried a balance on a credit card at 10%+? What about the opportunity cost for some bidders who may have bid against the insider dozens of times, tying up possibly tens of thousands of dollars?

Also, if the insider-bidder won a domain will he/she be made to turn over the domain names hewon at auction, to the benefit of the next highest bidder? It would seem appropriate that SnapNames should sue the former employee to force/compel him to surrender his "winnings".

What if the insider-bidder subsequently sold the domains won at auction for a profit? Should the profits all be taken back?

What's interesting is that there has been buzz on the(message) boards for years about a possible insider-bidder.

My advice: If you participated in a Snapnames action from 2005 onwards be certain that Snapnames has your current info.

What I'd like to see is a complete list of all the auctions with the bidders auction-nic. Not sure we're going to see this.

Interesting how this could take place for years with no one - until now - having actual, actionable knowledge of the activity.

FWIW, I've seen comments elsewhere suggesting that the long suspect bidder "Halvarez" was, in fact, the nickname used by the insider-bidder. Again, strange how there could be public buzz about Halvarez for years and yet, only now, is "that person" being exposed by the company. Say it ain't so!

7:52 pm on Nov 4, 2009 (gmt 0)

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It seems to have confirmed what many suspected. Now there is the problem of a loss of confidence in Snapnames.

Regards...jmcc

8:01 pm on Nov 4, 2009 (gmt 0)

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Lot of questions.

1) The bidder was well known in domaining circles. A quick Google search will show that many people thought he was a script or inside man. With all the attention the bidder received, SnapNames never thought about looking into this person?

2) He ended up winning a lot of auctions. Are they saying that he paid for all these domains individually out of his own pocket? If the guys goal was to shill auctions, it would appear that winning it would be a bad thing for a "rogue" employee.

3) This person was in so many auctions that I don't see how he had any time to work.

Whole thing seems like a gigantic mess with some holes in it.

8:11 pm on Nov 4, 2009 (gmt 0)

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They are also calling customers who were affected by this. They hired a forensic accounting company to find the correct numbers, and I just received a call to inform me that I'd be getting approximately $6,000 back for one particular purchase.

You have to be impressed with a company that takes a pro-active stance like that.

Apparently the culprit was a high-level and well-respected employee; someone that no one would ever suspect.

8:13 pm on Nov 4, 2009 (gmt 0)

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According to Domain Name News, the SnapNames User Name “Halvarez” Was Nelson Brady, VP of Engineering.

[domainnamenews.com...]

I'm not sure about US legislation but could this become a criminal investigation if complaints were filed?

Regards...jmcc

12:25 am on Nov 5, 2009 (gmt 0)

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You have to be impressed with a company that takes a pro-active stance like that

Pro-active?

Damage control?

Attempt to pre-empt class action litigation?

If it's true - that the name used was "Halvarez" - then it's also true that people have been pointing to Halvarez with . . doubts . . for at least a year before the news.

I suspect this won't end with the moneys offered. There probably needs to be full public disclosure: 1) of every auction he was involved in; 2) of every auction he won; 3) of everything that is being done to recoup any names he won; etc.

Corporate VP? Wow. Wow. Wow.

Given how long it has taken to "discover" this one has to wonder if there haven't been other insiders involved. If Halvarez could get away with this, without being discovered for years, that suggests there could be others "as yet undiscovered".

1:21 pm on Nov 5, 2009 (gmt 0)

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Background, details and photos of the alleged wrongdoer - Nelson Brady [dnjournal.com] - at DNJournal.com.
1:51 pm on Nov 5, 2009 (gmt 0)

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people have been pointing to Halvarez with . . doubts . . for at least a year before the news.

A year? I'd have said a lot longer than that. There are discussions going back to at least 2006 about the behaviour of that bidder.

2:32 pm on Nov 5, 2009 (gmt 0)

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I was speaking cautiously, pending fact checking. ;)

Ya, given how long the rotten fruit was hanging something just seems off about the "farmer's" report that only now have they been able to figure out that something is rotten.

Smells like there's more rotten fruit in the bins somewhere.

IF Snapnames doesn't do more than just "fire him" - like sue him, seek to recover all ill-gotten gains and at least investigate criminal sanctions - some/many may infer that silence has a price/value, i.e., only pushing him out the door but not going after him with a vengeance could be seen as a move that might keep him from talking about any other suspect activities he might be tuned in to. Might he know about other bad actors or bad acts? Might he have something to say about who knew what and when they first knew it? These are the types of questions that only get answers, in many cases, when the lawsuits are filed, the prosecutor impanels a grand jury, etc.

I'll venture that such insider financial actions, touching on cross-border transactions/commerce, likely implicates more than one Federal law.

Rotten industry? Still, to this day, I see people registering blatant trademark infringing domains and . . parking them. Perhaps not as bad as it once was but there's still no end to it.

3:25 pm on Nov 5, 2009 (gmt 0)

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This is huge. It's not often that a conspiracy theory is proven to be true. When is the last time that has ever happened?

This revelation is going to be hard on all the domain auction houses.

3:30 pm on Nov 5, 2009 (gmt 0)

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There is also a problem with Brady being so highly placed in the company. He was a VP and there is the problem of Due Diligence when Oversee was purchasing Snapnames. I'm surprised that the FBI and IRS are not investigating. However this may have some second order fallout for ICANN as it was their lax administration that faciliated the rise of Snapnames, Pool et al.

Regards...jmcc

7:48 pm on Nov 5, 2009 (gmt 0)

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According to Snapnames the employee participated in 5% of auctions since 2005/6.

I can't imagine what 5% realy means (10,000 or 1,000,000).

I suspect there is more to this story.

8:00 pm on Nov 5, 2009 (gmt 0)

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have not heard of the motivation. was it to increase revenue for the company?

did he have access to view customer maximum bids?

8:03 pm on Nov 5, 2009 (gmt 0)

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Regulars in domain biz used to speculate way back in 2006 on other forums that “Halvarez” was an ID used by snapnames to jack up the bids. So the suspicions were not exactly wrong.

No player in this business is clean. I believe a few more Madoffs of domain business will come out of woodwork in near future.

9:01 pm on Nov 5, 2009 (gmt 0)

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I can't imagine what 5% realy means (10,000 or 1,000,000).

From the link Webwork provided above;

Brady reportedly drove prices up with fraudulent bids in as many as 50,000 auctions.

It really is astonishing this was going on for 5 years, and not one person at SnapNames suspected anything?

9:20 pm on Nov 5, 2009 (gmt 0)

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"So how did SnapNames discover the fraud? Craig Snyder may be the missing link.

"Craig has been described as a sincerely principaled businessman by those who know him, and is famous for cofounding Marchex. He started working at iREIT in September 2006, just a few months before the DomainQueue domains were transferred to iREIT.

"DNW speculated that Snyder may have been hired by Oversee.net in August of this year to “clean up the company.” Given Craig’s deep understanding of the domain industry, his role overseeing SnapNames, and his insider knowledge about the DomainQueue deal, it may have been an easy scam for him to uncover."

Source:

[dotsnews.com...]

We can't fault new owners for the sins of old leadership.

The thing that bugs me is he was a speaker at domain conferences?!

[dnjournal.com...]

I love this innocent forum question from 2006:

"why is halvarez on snapnames always not the high bidder?"

[dnforum.com...]

p/g

10:43 pm on Nov 5, 2009 (gmt 0)

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Another black eye for the industry ... like it needs THAT ...

I have to wonder:

- How deep this goes (no way do I buy that this was one individual acting on his own)
- If he was using multiple ID's in addition to halvarez
- If there are other "halvarezes" lurking at the other auction venues.

2:22 am on Nov 6, 2009 (gmt 0)

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This is huge. It's not often that a conspiracy theory is proven to be true. When is the last time that has ever happened?

In the domain industry, none that I know of. There was a famous poker incident on a major poker site though that is similar in nature. An employee I believe was playing in games where he was able to see the whole cards of his opponents. There was a lot of statistical analysis that showed how unlikely his play was but the site never looked into it. Eventually word got out and it caused a huge scandal.
12:55 pm on Nov 6, 2009 (gmt 0)

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In the domain industry, none that I know of.
Snapnames, as they say on UK cop shows, has form. It was heavily involved in the .eu landrush fiasco.

Regards...jmcc

3:44 pm on Nov 6, 2009 (gmt 0)

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I have a question: How did "Halvarez" pay for his domain wins . . all these years?

Never a credit card? Never any banking info? No traceable source of the funds . . just thousands of routine and reliable payments? Sounds like an industry that can be trusted: Untraceable funds. Dubious WhoIs records. No real demand for a verifiable identity to be allowed to participate "in the business of auctions". Just pay the bills.

There are likely drug lords that haven't been this successful in "doing business in the open" and moving money around for so long.

OBTW, IF the WhoIs records for the domains are full of inaccuracies, is there any chance of having all those domains canceled? ;0/

4:01 pm on Nov 6, 2009 (gmt 0)

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Sounds like systemic corruption - as if this was built into the system. And if the credit card data and payment data did not exist then there are serious questions to be answered regarding the audit and accountancy procedures in Snapnames.

Regards...jmcc

4:47 pm on Nov 6, 2009 (gmt 0)

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How does any auction house enforce "no insider bidding" if it doesn't require full and accurate disclosure of identity before allowing anyone to bid?

Even with full disclosure how does an auction house enforce their rules if it doesn't take steps to assure that insiders aren't feeding information to outsiders who will do their bidding?

How does any auction how deter insider bidding if it doesn't have an audit trail mechanism in place, i.e., require accurate/verifiable WhoIs info that is verified - even if the same info is subsequently made private at the time of transfer and new-registration?

It appears that much may be done to accommodate anonymity of bidder/registration that simultaneously plays into insider bidding scenarios.

My sense is that this matter needs to be placed in the hands of those agencies with criminal investigative and prosecutorial authority, or this industry will forever be damaged.

Will the company itself invite such a housecleaning? Doubtful, but possible.

Can anyone offended, concerned or harmed by this action contact the proper authorities? I don't see why not. At least, perhaps, to report the situation to oversight bodies, attorneys general, FTC, etc.

It's one thing for Snapnames to offer compensation - especially if it does so without requiring any "waiver" of rights. It's another thing to think that the tale ends simply by making reimbursement payments according to their own formula.

It might actually be healthy, and restore confidence, for Oversee/Snapnames to invite the outside investigation. Indeed, though I'm no expert on all the laws involved in this mess, it might actually be required that they report the incidents, activities, etc. since they are dealing with public auctions, interstate commerce, online credit and money transfer transactions, potentially fraudulent (unfair advantage, material misrepresentation, deceptive practices by an executive, etc.) financial transactions, etc. (Hopefully they already have if that's the case.)

My hunch is that the FTC has to have regulatory authority and criminal authority. IF there's no real enforcement or measures to penalize insider-biased transactions then the entire online auction industry is in serious jeopardy. Sure, there have long been all maner of doubts but if ever there was a case to submit to criminal investigation and sanction . . this should be it.

8:08 pm on Nov 6, 2009 (gmt 0)

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I'm also wondering how he paid for all these domains. From what I've seen, he bought a lot and some were not cheap. He either had a lot of cash available or didn't have to pay for it.

Has there been any mention of the authorities getting involved? Wouldn't Oversee have turned this over for criminal investigation as it could be construed as fraud and embezzlement? As for those harmed by it, I definitely think filing a report with the FTC, FBI, and district attorney of where they are located is warranted.

I know people have respect for some people under the Oversee umbrella, but I think it would be insane to hold any of your domains or use them for anything. If it took them 4+ years to catch someone that many people not invovled with the company already knew, I don't have a lot of faith in them. Our domains are our most precious assets many times and they should be in the hands of people we trust.

8:13 pm on Nov 6, 2009 (gmt 0)

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full and accurate disclosure of identity

Does anyone actually know how to do this? I'm not aware that a (globally applicable) mechanism actually exists. Perhaps it's time it did!

You only have to look at the way (standard) SSL certificates were "verified" to realise that in many cases there wasn't a whole lot of verification going on. EV-SSL might be better/stricter, but it's expensive and is restricted to certain entities - AFAIK individuals can't get an EV-SSL as an individual.

Webwork - say you opened a responsible domain auction site? How would you suggest I verify my identify were I to open an account with you?

1:30 pm on Nov 7, 2009 (gmt 0)

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Interesting questions. I'll sleep on them while at PubCon, but if I come up with a solution . . should I post it . . before patenting it? :P

Webdoc, if concealment was elemental - and, as you argue, easy to achieve - why do you suppose Halvarez used the same identity in 50,000 auctions? If obscurity it relatively easy why not use 20, 50, 100 different bidding identities/accounts?

If concealment is easy to achieve, as you state, then should Snapnames participants take them (Snapnames/Halvarez) at their word that there was only 1 scammer and he is Halvarez?

The reason I ask the second question was that I only participated in about 100 auctions, but even in that small sample I saw certain names repeatedly. One was Halvarez, but there were others that appeared to bid at every/most auctions. Who's to say that 1 or 2 of those other bid-identities wasn't simply another alter ego for the man behind Halvarez?

Webdoc, given your proposition

Does anyone actually know

would you therefore conclude that online auctions are inherently untrustworthy . . and therefore not to be trusted? (I wonder how far the regulatory agencies are prepared to go in confronting the issue?)

Regarding identification my home State employs a 6 points of identification [state.nj.us] procedure. I can't imagine using a similar process to assure the integrity of an online bidding system, and even if it was applied, that wouldn't stop strawman bidding.

More interesting questions:

1. What were Snapnames internal procedures for detecting unusal patterns of bidding activity?

2. Was there a pattern to Halvarez's bidding? Did Snapnames deploy any version of pattern detection?

3. "What's different now?"

4. If a company's employees design and administer that company's operations software might that open a few security holes?

2:48 pm on Nov 7, 2009 (gmt 0)

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would you therefore conclude that online auctions are inherently untrustworthy . . and therefore not to be trusted? (I wonder how far the regulatory agencies are prepared to go in confronting the issue?)

Absolutely ..and that has always been the case ..as has the whole idea of registration companies having their own ..or "arrangements" with certain ones ..

Fraudsters paradise ..as long as you can pay the "buy into the game fee" ( to become a registrar ) to be able to sit at the table and entice the marks to play the game

11:14 am on Nov 8, 2009 (gmt 0)

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I too have bidded in Snapnames auctions and have competed against Halvarez for names. He bid me up on one name that I won. And yeah, there are other noticeably recurring names, not just Halvarez, and not just at Snapnames.

even if it was applied, that wouldn't stop strawman bidding.

No, but it would constrain it, and you have to start somewhere.